Thursday, February 14, 2013

Talk of a potential bilateral trade deal between the US and EU is heating up, probably because Obama gave it attention in his State of the Union Address. Matt Yglesias thinks the deal is going to be difficult, because it will focus on "thornier" issues like agriculture and regulatory policies. Tyler Cowen thinks that regulatory barriers makes a deal unlikely as well. The Financial Timesalso sounds a somewhat skeptical note. There's plenty more where that comes from if you look around the commentariat.

Well, in a stunning reversal of our typical demeanor, Sarah and I are here to make the optimistic case for a deal getting done. The full essay is in The National Interest, but the basic argument is that normal political problems standing in the way of a deal are reversed in this case: there are no easily-identifiable domestic interest groups likely to mobilize politically to lobby against it, it might provide the US and EU with much-needed leverage in WTO negotiations, and it could impact the future of international investment law.

2
comments:

Canada and the EU are putting the finishing touches on a FTA and the remaining issues appear to be tied to government procurement in Canada, Canadian IP rules and agriculture. While I think you're spot on about the politics when it comes to traditional trade barriers, I am skeptical about how much support there is in the US or for that matter Canada for regulatory harmonization. The interesting question is whether or not this kind of trade deal is a mechanism for reforming domestic regulation in a more market friendly manner. If Canada sacrifices its dairy marketing boards then maybe yes it is;if Canada strengthens patent protection on pharmaceuticals it'll be a step away from liberalization.

Thanks for the comment. We knew about the Canada-EU FTA, but couldn't cover it properly in the space we had. It's possible that that, in combination with US-Canada integration via NAFTA, provided some of the emphasis for the EU-US negotiations to begin.

I think some regulations will be more difficult to harmonize than others. Many producers would love to have harmonization in manufacturing. Agriculture may be more difficult, esp when it comes to things like GMOs.

I also think you're right that harmonization does not always mean liberalization. Pharma IP is one example of this.

Anyway, the outcome remains to be seen. What Sarah and I were arguing is that the normal political constraints appear to be somewhat different in this case. Whether other constraints emerge is something of a different question, but for now all of the major stakeholders appear to support some kind of deal. That may change when the details are negotiated, of course.